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2019 (3) TMI 988 - AT - Income TaxDeduction admissible u/s. 80 IC - Disallowance of expenses of taxable unit after reallocation - Low NP of taxable units as compared to the exempt ones also audit expenses were only debited in one taxable unit - HELD THAT:- As decided in favour of assessee [2016 (9) TMI 752 - ITAT DELHI] and [2018 (3) TMI 1738 - ITAT DELHI] assessee has produced all the books of accounts and vouchers before the AO during the assessment proceedings. In fact, no show cause query was issued by the AO on this account during the assessment proceedings. AO has not considered the fact that the units in exempted zones are mainly engaged in manufacturing on job work basis where there is either negligible or no input cost of raw material involved. It was noted that if the sales were made using their own raw material, there would be substantial difference in the GP rate insofar as, if the cost of raw material was excluded, the GP rate in all the units would remain the same. The fact that the exempted unit at Haridwar has shown a loss has not been referred to by the AO. Therefore, it is clear that no profit has been diverted to this unit. It was further noted that there has been no investigation or specific exercise to show that the amount claimed as deduction u/s 80-IC was wrong. We find considerable cogency in the finding of the CIT(A) that there is no ground for disallowing claim for job work expenses for the eligibility u/s 80-IC as the same is allowable. Deduction under Section 80-IC - Substantial expansion - claiming the exemption at the same rate of 100% beyond the period of five years on the ground that the assessee has now carried out substantial expansion in its manufacturing unit - HELD THAT:- On a perusal of para 21 of the decision rendered in the case of CIT vs. Classic Binding Industries [2018 (8) TMI 1209 - SUPREME COURT OF INDIA] it is seen that the said position of law has not been varied. Accordingly upholding the order to the extent as far as position of law is concerned the issue is restored back to the file of AO with a direction to grant relief after verification of facts in accordance with law. Needless to say that the assessee shall be granted a reasonable opportunity of being heard.
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